Essential information and services for self releasing artists

Unravelling the many Codes and Acronyms of the music industry. Part 2 – Who’s who and what they do.

You just found out you need to register your tracks with a CMO like PPL. They will give you an ISRC, and you also need an EAN but all you have is a UPC!? You might also need an AP2 from MCPS. A PRO like PRS will give you an ISWC… but what’s the difference between a PRO and a CMO?

Has all the codes and acronyms in the music biz got you confused? You’re not the only one! Read on and I will explain all.

In part 1 we looked at the various codes needed to correctly register your tracks. Now we will look at the organisations that handle that data.

CMO – Collective Management Organisation

Copyright owners (rightsholders) have the right to limit the use of their works how they see fit. When they do agree for it to be used they have the right to receive payment for that usage. This can be arranged directly between the rightsholder and the party that wishes to use it. For organisations that use a large number of copyright works, such a broadcaster, it would be impractical to obtain permission individually.

Instead, organisations have been set up to manage these rights collectively. They also collect and distribute the revenue from issuing the licenses.You may also have heard the term PRO or Performing Rights Organisation. Technically speaking a PRO is a CMO, there is no real difference.

PRO is often used to refer to societies that manage composition copyright (PRS, ASCAP, APRA etc). CMO is used to refer to the organisations that look after the copyright in recordings (PPL, Sound Exchange, PPCA etc).

The role of these societies is to agree “blanket license” fees with broadcasters and other businesses using music. They collect these fees along with usage reports (or surveys) and allocate them to the beneficiaries of those copyrights. As well as the transactional activities, these organisations work behind the scenes to ensure the use of music is fairly remunerated and they will often take these matters to court, on behalf of their members, in some cases.

Most of these societies operate as “not-for-profit” organisations. This means any excess money left after costs have been covered and members have been allocated their royalties is either paid out to members as an additional payment or invested in industry funds and causes such as anti-piracy and grants schemes.

Composition Copyright Societies – For writers and publishers

If you write songs or compose music that is commercially or publicly performed and/or available for purchase then you need to join a composition copyright society. You can only join one, but most of them can collect internationally, and you don’t have to join your local one. The obvious advantages of joining a local society are that they will be in the same time zone and speak the same language as you (hopefully). However, it may be worth considering joining an overseas society especially if you get more airplay in another country compared to the one you live in, as you will get the royalties quicker if they are being collected for you by the society in the country the royalties were earned.

Composition copyright collection covers two areas. Firstly, “performance” of the composition (which covers gigs, and usage of recordings of the song, which also requires an additional license for the recording itself as well as for the composition). Secondly, “mechanicals” (which covers the physical copying of the song). In some countries, there are different societies for performance and mechanicals. Sometimes they are the same society or the 2 societies have joined together.

Mechanical Copyright

A mechanical license is required when physical copies of copyright music are made. This first came about in music when self-playing instruments such as player pianos and barrel organs became popular. Music was “recorded” onto paper rolls with holes punched in it, which when played back caused the hammers to strike the strings.

Each time one of these piano rolls was created for a mechanical player, a license fee had to be paid to the owner of the composition, hence the term mechanical license. Player pianos died out when phonograms became popular at the turn of the 20th century but the rule remained and the mechanical license became a requirement for manufacturing records. This now covers all physical formats and in some cases downloads and streaming.

When a record label makes copies of a release they are required to pay a license fee based on the wholesale price of the release (Published Price to Dealer or PPD*). In the UK that license is issued by MCPS and is currently set at 8.5% of PPD per copy. If a label is pressing 1000 copies of a 10 track album and the PPD is £6.00 the mechanical license fee would be £0.51 per copy, £510 in total. Which works out to be £51 per track. Once MCPS deduct their 15% commision** each track will be allocated £43.35, to be divided among the writers.

Mechanical Licenses

The MCPS audio product (AP) licenses come in a few different types, AP1 licenses are calculated based on net copies shipped and accounted for quarterly. AP2 licenses are based on the amount to be manufactured and are payable prior to manufacturing. Under an AP2 license, promotional copies (those given away free of charge) are exempt from the license. Up to 25% of the amount manufactured can be declared promotional with a maximum of 250 copies. If more than 25% or more than 250 copies of 1000 units are to be used for promo then an AP4 license is also required. Record labels with an AP1 would only be declaring the copies they ship to stores so promotional copies would not be counted anyway.

You only need an AP1 or AP2 license if you are releasing cover versions, or compositions that you did not write that are not in the public domain. If you write your own songs, and/or own your own publishing company, and you wish to release these songs you have the right (as the writer and/or the publisher) to set up an exclusion for your own record company from royalty collection arrangements.

Pretty much every country has at least one collection society for music composition, for performance or mechanical (or both) so I won’t list them all, but here’s a list of the most notable ones.

The USA has 3 competing performing rights organisations (PRO). ASCAP is the oldest and was founded by a group of composers and publishers. BMI is the newest, but the largest, and was set up by Broadcasters in response to ASCAP attempting to double license fees. SESAC is much smaller with only 60,000 members compared to ASCAP with 640,000 and BMI with 800,000. Both ASCAP and BMI operate as not-for-profits, SESAC is not run as a not-for-profit and is owned by The Blackstone Group (who are the largest alternative investment firm in the world) and also own HFA, The Harry Fox Agency.

The primary copyright in music is the composition, without compositions there can be no performance, no recordings, nothing. That also includes improvisation, as an improvised piece is still composed it’s just that the composition and the performance happen at the same moment. Hence, the copyright within the sound recording is referred to as a “related right” and Neighbouring Rights is the term used to refer to the management of those rights and the collection of the associated revenue.

The rightsholder is deemed to be the person, persons, or entity that financed or licensed the track. You don’t have to be a composer to own a sound recording. You can own recordings of cover versions, as long as the recording doesn’t contain “samples”.

Both the Rightsholder (usually a record label) and the performers on the recording are entitled to Neighbouring Rights revenue. As a self-releasing artist, you are both the rightsholder and a performer so are entitled to both types of payments. You will need to join the CMO as both a rightsholder and a performer. You will also need to make sure you are listed as both on your recording registrations.

The revenue is split roughly 50/50 between the rightsholder and the performers. The performer share is then divided again between the “featured” performers (the main artist and anyone who appears by name as “featuring” or “with” or something similar) and “non-featured” performers (the session players, the producer and any eligible studio personnel). The ratio of that split is set out by the CMO and varies from country to country. EG UK 65% goes to “featured” and 35% to “non-featured”, in USA 90% goes to the featured and 10% to non-featured.

Same play, different pay.

The law in each country can also differ, and as a result, not all recordings and performers are eligible for all royalties. eg. in the USA there is no neighbouring rights license required to play recordings on terrestrial TV or radio or in stores. SoundExchange is limited, by US law, to only be able to collect “digital royalties” for use of sound recordings on non-interactive web streaming services such as Pandora and Sirius XM.

As international collections are done via reciprocal deals each CMO will only payout to other CMOs what they receive back from them for their members. eg. As shops in the USA do not need a license to play sound recordings if a US citizen, records a track in USA that is then played in a store in the UK they will receive nothing, but if that same track had a performance by a performer who was a citizen of a “qualifying country” such as Canada, they would receive the full allocation.

Join 1, or join them all?

Unlike composition societies, you can join more than one neighbouring rights society. As long as the memberships don’t conflict, IE you don’t have 2 different societies trying to collect the same revenue, then you can join as many as you like. I have seen some people with 30+ different memberships. Just like composition societies it may be worth joining the societies in the countries that you get the most airplay and/or other usages.

You can instruct each society to either collect just in that country (regional mandate) or to collect worldwide (international mandate). You can also do “Regional Plus”, which is a regional mandate plus one or more countries, or “Worldwide Minus” which is an international mandate excluding one or more countries.

It is possible to join multiple societies and then give them each the countries you think they would be good at collecting from internationally.eg. If you were to join GVL, the German CMO, it may also be worth having them collect from the Austrian society LSG as they both speak German.As neighbouring rights can be very confusing there are many agents who offer to collect this money for you, for a fee.

Be aware though, while many agents claim to be able to “collect more” for you…there is no “more” there is only 100% of what you are due, signing up with an agent will only ever get you less than the 100% available. You just have to assess if the 80-90% they pay to you is worth more than 100% of what you are able to collect yourself.

Just like the composition societies, every country has at least one, so here are the most notable neighbouring rights societies.

PPL (UK) – Phonographic Performance Ltd – Rightsholders and PerformersSoundExchange (USA) – Rightsholders and Featured Performers.Non-featured performer royalties are paid in the USA by AFM & SAG AFTRA which is primarily a union, so it’s easier for a US-based non-featured performer to get another CMO to collect this revenueGVL (Germany) – Gesellschaft zur Verwertung von Leistungsschutzrechten (In English: Company for the exploitation of ancillary copyright) – Rightsholders and PerformersSENA (Netherlands) – Stichting ter Exploitatie van Naburige Rechten (In English: Foundation for the Exploitation of Neighbouring Rights) – Rightsholders and PerformersPPCA (Australia) – Phonographic Performance Company of AustraliaHopefully, that has clarified a few things and has brought up some new questions no doubt. Feel free to email me (info@traxploitation.com) or leave a comment if you have any follow up questions.

*Sometimes also referred to as PDP - Published Dealer Price

** 15% commission based on the rate for AP2 license, AP1 license commission is 7.325%